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The wait for Egypt’s second credit rating agency is almost over, with Beltone Financial Holding subsidiary Beltone Capital forming a joint venture with Italy’s CRIF Ratings to launch a credit ratings and business solutions company in Egypt, with sights set on expanding to the region at large, a joint statement (pdf) reads. The Financial Regulatory Authority selected the alliance earlier this year to set up a second credit rating agency.
The entity is expected to commence operations following FRA approval, although the exact launch date and its official name remain under wraps. Once the new credit rating agency gets off the ground, the Middle East Rating and Investors Service (MERIS) — a joint venture between Moody’s and Finance and Banking Consultants International (FinBi) — will no longer be the country’s sole credit rating agency.
The new venture will offer a “holistic set of solutions” to the local market, including debt ratings, SME and corporate borrower assessments, portfolio evaluations for non-banking lenders, ESG compliance services, unsolicited ratings, and lender onboarding tools, according to the statement.
“This partnership reflects Beltone’s commitment to serving the market with innovative, data-backed solutions. Together, we will deliver unmatched services that combine CRIF’s credit rating track-record with Beltone’s on-ground knowledge and data-driven approach,” Beltone Holding Group CEO Dalia Khorshid said.
The search for another rating agency to handle the growing popularity of local asset-backed securities has been in the works for a few years. The FRA scrapped its requirement that at least 10% of the agency be owned by international firms in a bid to move the process along. The authority was in negotiations with an unnamed company interested in the license in 2022 before opening the door for applications in August 2023. The establishment of another credit rating agency is expected to speed up the process of issuing debt, which currently takes some 66 days.
Sound smart: At its core, a credit rating agency assesses the creditworthiness of entities — which in the case of the license being offered up the FRA is securities. The license from the FRA will allow the newly-formed credit rating agency to assess the issuer of the security, the nitty-gritty details of the security, and its collateral, along with broader economic factors — think interest rates, growth rates, inflation — and then give the security a rating that ranks the risk of default. Without accurate and fair ratings, it makes it much harder for investors to assess the risks of acquiring certain debts and muddies the water in terms of pricing — effectively putting off investors altogether.
